US equity futures declined along with European stocks as investors scrutinized a flood of corporate earnings for clues on the outlook for the global economy amid high interest rates and inflation.
(Bloomberg) — US equity futures declined along with European stocks as investors scrutinized a flood of corporate earnings for clues on the outlook for the global economy amid high interest rates and inflation.
Contracts on the S&P 500 and the Nasdaq 100 traded about 0.5% lower, with First Republic Bank plunging more than 20% in premarket trading after results late Monday shook investor confidence, after weeks of calm in the banking sector. United Parcel Service Inc. sank more than 5% on disappointing sales guidance. PepsiCo. Inc. gained after raising its outlook. Spotify Technology SA rose after adding subscribers. Tech heavyweights including Microsoft Corp. and Alphabet Inc. will report results later Tuesday.
A Bloomberg gauge of the dollar erased an earlier decline and Treasuries extended gains after 10-year yields slid eight basis points Monday, the biggest one-day decline since March. Government bonds across Europe rallied, with the German 10-year yield falling as much as eight basis points.
“What will be crucial for the outlook in tech is the rate expectations, and currently the market is pricing in swift cuts by the Fed, for the second half of this year, which we do not agree with,” Ann-Katrin Petersen, a senior investment strategist at BlackRock Investment Institute, said on Bloomberg TV. “This sector is very rate-sensitive, so it might have digest this potential for a reversal in Fed rate expectations for the second half of this year.”
The Stoxx Europe 600 index dropped about 0.5%, with Swiss lender UBS Group AG weighing on banks after results that fell short of analysts’ expectations. Spain’s Banco Santander SA slid as concern over outflows offset a first-quarter earnings beat.
In other earnings news from Europe:
- Swiss food producer Nestle SA advanced after posting healthy revenue growth
- Freight operator Kuehne + Nagel International AG jumped after a strong sea-logistics performance
- Drugmaker Novartis AG rose after first-quarter earnings exceeded analysts’ expectations
- Engineering firm ABB Ltd. climbed after raising revenue guidance for the year
- Associated British Foods Plc fell after a profit miss
- Swedish miner and smelter Boliden AB slumped, pulling the basic resources sub-index lower, after disruptions and rising costs at its mines unit weighed on earnings
Markets are now pricing the peak for US interest rates in June, and then a decline to end the year below 4.5%.
The small shifts in Fed projections underscore the lack of direction at the start of a busy week for economic data and corporate earnings. Data published Monday showed US manufacturing data was weaker than economists forecast, while uncertainty over the debt ceiling persisted. Later this week, US GDP data is forecast to reveal slower growth, and the so-called core PCE deflator, the Fed’s preferred inflation gauge, is expected to show price growth cooled.
“The data justifies a 25 basis-point hike,” said Erick Muller, head of product and investment strategy at Muzinich & Co. in London. “But it’s going to be difficult for central banks to raise rates and then quickly within a few months to start reversing that.”
The CBOE VIX index of equity volatility remained near the 17-month low reached last week, but JPMorgan Chase & Co. strategist Marko Kolanovic said that may spell trouble for stock investors as it gives a false sense of calm.
Elsewhere, oil dipped and gold was steady. Bitcoin slid for a third day.
Key events this week:
- US new home sales, consumer confidence, Tuesday
- Australia CPI, Wednesday
- Sweden rate decision, Wednesday
- Eurozone economic, consumer confidence, Thursday
- US initial jobless claims, GDP, Thursday
- Bank of Japan meets on interest rates, Friday
- Euro-area GDP, Friday
- US personal income, Friday
Earnings highlights:
- Tuesday: General Motors, General Electric, McDonalds, Microsoft, UPS
- Wednesday: Boeing, Meta, Hilton
- Thursday: Amazon, American Airlines, Intel, Mastercard, Southwest Airlines, Hershey, Honeywell, Barclays
Some of the main moves in markets:
Stocks
- S&P 500 futures fell 0.5% as of 6:40 a.m. New York time
- Nasdaq 100 futures fell 0.4%
- Futures on the Dow Jones Industrial Average fell 0.4%
- The Stoxx Europe 600 fell 0.4%
- The MSCI World index fell 0.2%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro fell 0.1% to $1.1030
- The British pound fell 0.1% to $1.2470
- The Japanese yen rose 0.2% to 133.99 per dollar
Cryptocurrencies
- Bitcoin fell 0.5% to $27,319.1
- Ether fell 1.3% to $1,815.5
Bonds
- The yield on 10-year Treasuries declined five basis points to 3.44%
- Germany’s 10-year yield declined seven basis points to 2.44%
- Britain’s 10-year yield declined four basis points to 3.74%
Commodities
- West Texas Intermediate crude fell 0.5% to $78.33 a barrel
- Gold futures fell 0.3% to $1,994.20 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Tassia Sipahutar, Sujata Rao and Subrat Patnaik.
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